The Decline of Blue America

Economic policies of Democratic blue states have failed, studies show

Democratic-controlled states throughout the country are experiencing financial difficulty and out-migration.

President Barack Obama’s home state of Illinois, for example, recently had its credit rating downgraded by Standard & Poor’s following a failed effort to reform the state’s massively underfunded pension system. The state’s credit rating is now among the worst in the country.

The state’s unfunded pension liabilities exceed $80 billion, the report found. Medicaid liabilities have doubled over the past decade at a rate that “will outstrip revenue growth by a wide margin.”

Total pension funds for state and local government workers, many of which are unionized, are underfunded by as much as $3 trillion. Unfunded liabilities for government employee health care benefits exceed $1 trillion, according to the report.

The state’s financial woes, the report found, have been exacerbated by many of the same problems that have plagued the federal government over the last four years, such as a “difficulty in implementing cost reduction proposals.”

President Obama’s most recent budgets and deficit reduction plans were panned by independent analysts for their overreliance on gimmicks that failed to yield genuine savings.

The president has similarly failed to reach a comprehensive agreement with Congress to alter the country’s unsustainable fiscal course, producing only a series of deferred-action measures such as the controversial $1 trillion “sequestration.”

Thus far, however, the Illinois state legislature has sought to raise revenue by hiking individual and corporate income taxes by more than 60 percent.

Illinois ranked 48th in a recent survey of business leaders regarding the best states for business. Blue states New York and California rounded out the bottom of the list while Republican-led Texas ranked first.

Texas was joined at the top by traditionally conservative states such as Florida, North Carolina, Tennessee, and Indiana.

California is facing its own economic woes. The state is sagging under rapidly increasing salaries and benefits favored by public sector unions, which overwhelmingly support Democratic politicians, despite having the fourth-highest tax burden in the nation.

Massive government pension obligations are “the root problem” for states struggling financially, said Douglas Holtz-Eakin, the former director of the Congressional Budget Office.

“It’s worse in states whose governments are far more favorable to public sector unions,” he said. “These are deep structural problems.”

California also has a peculiar fascination with expensive taxpayer-subsidized mega-projects such as high-speed rail. The state’s high-speed rail project has been deemed by independent experts to be too costly to proceed despite receiving billions of dollars in the 2009 stimulus package.

Red state economies are performing better than those of blue states by a litany of measures. Personal income growth is higher. Credits ratings are generally better among red states, which have succeeded in reducing their debts burdens by a greater percentage over the past several years.